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New Mexico regulator closes office, conducts remote examinations
On March 30, the Securities Division of the New Mexico Regulation and Licensing Department announced that its offices are closed and it will be conducting examinations remotely. The Division also announced that licensing staff continue to process applications and that its enforcement staff will be vigilant to detect and prevent securities fraud and illegal securities sales.
SEC issues multiple whistleblower awards
On March 24, the SEC announced awards of over $570,000 to two whistleblowers for providing “significant information and assistance that helped the Commission bring multiple successful enforcement actions.” According to the formal order, the first whistleblower received an award of approximately $478,000, and the second whistleblower received an award of approximately $94,000. The SEC stated that the first whistleblower’s award was substantially higher because the information (i) helped the SEC bring antifraud charges related to conduct that was ongoing at the time the whistleblower reported the information to the SEC; (ii) played a critical role in the development of the case; and (iii) related to all the enforcement actions. In comparison, the second whistleblower’s information—while important—contributed to charges brought against only one of the respondents, the SEC stated.
Earlier on March 23, the SEC announced an award of over $1.6 million to a whistleblower in an enforcement action. According to the SEC’s press release, the whistleblower “provided helpful assistance early in the investigation, preserving Commission time and resources,” and “helped form part of the basis for charges brought in a successful enforcement action.” The formal order—which acknowledged that the allegations reported by the whistleblower “would have been hard to detect”—stated, however, that while the whistleblower “unreasonably delayed” reporting the allegations, the SEC chose not to factor in the delay as severely as it might have done had the delay occurred entirely after the Dodd-Frank Act established the whistleblower award program.
The SEC’s March 24 press release states that it has awarded 76 individuals a total of approximately $396 million in whistleblower awards since its initial award in 2012.
SEC provides additional temporary regulatory relief and assistance to market participants affected by Covid-19
On March 26, the SEC issued a press release announcing an order and a temporary final rule providing temporary relief and assistance to market participants affected by Covid-19. The statement notes that the SEC is providing (i) temporary relief from notarization requirements from March 26 through July 1 to filers in the EDGAR system, subject to certain conditions; (ii) for Regulation A and Regulation Crowdfunding issuers, a temporary extension of 45 additional days to file certain disclosure reports that would otherwise have been due between March 26 and May 31, subject to certain conditions; and (iii) a temporary conditional exemptive order that provides affected municipal advisors with an additional 45 days to file annual updates to Form MA that would have otherwise been due between March 26 and June 30, subject to certain conditions.
Connecticut regulator permits paperless submission of security and business filings
On March 25, the Securities and Business Investments Division of the State of Connecticut Department of Banking issued interim guidance permitting paperless regulatory filings in light of the Covid-19 pandemic. The interim guidance permits and “highly encourage[s]” securities registration, exemption and covered security filers, as well as business opportunity registration filers, to submit regulatory filings and payments electronically. The Division also waived certain manual signature and notarization requirements.
Washington offers temporary no-action relief for registrants affected by the Covid-19 outbreak
On March 24, the Washington State Department of Financial Institutions, Securities Division (DFI) announced it will take no action to enforce various provisions of the Securities Act in response to the Covid-19 crisis. This includes offering relief for: (i) registration and filing requirements for professionals required to be registered with the division; (ii) the requirement to obtain physical signatures on the U4 form (Uniform Application for Securities Industry Registration or Transfer); and (iii) annual update filings and document delivery requirements by state-registered investment advisers.
Financial professionals who rely on such no-action relief must keep a copy of the state order in their records to demonstrate their reliance on it. This no-action relief will remain in effect until April 30, 2020, unless extended or rescinded.
California DBO issues guidance on securities and franchise filings
On March 22, the California Department of Business Oversight issued notice urging securities and franchise filers to submit filings electronically and request waivers of automatic effectiveness for paper filings. The notice also provides that effective immediately the DBO will accept use of e-signature software in lieu of notarization and will waive the additional filing fee for renewals filed after franchise registration has lapsed through June 30.
Alabama Securities Commission will conduct exams remotely
On March 23, the Alabama Securities Commission released information about changes to its work practices to respond to Covid-19. Among other things, it noted that audit field examiners are conducting streamlined, remote examinations by phone and email, and its staff will be responsive and receptive to requests for extensions and other regulatory relief.
SEC broadens and extends relief for businesses affected by Covid-19
On March 25, the SEC announced that publicly traded companies have an additional 45 days, subject to certain conditions, to file annual and quarterly reports in an effort to help businesses whose operations may be affected by Covid-19. Disclosure reports due between March 1 and July 1 will be eligible for extensions if companies can justify the need, the SEC stated in the announcement, which supersedes and extends a previously issued order on March 4. To qualify for an extension, “companies must continue to convey through a current report a summary of why the relief is needed in their particular circumstances for each periodic report that is delayed.” In addition, the SEC issued orders (see here and here) that will give certain investment funds and investment advisors more time to meet filing and delivery requirements and more flexibility to avoid in-person meetings. These orders broaden and extend relief that the SEC announced earlier this month (covered by InfoBytes here). The announcement also provides public company disclosure guidance as well as additional information with respect to certain obligations under various securities laws.
Federal Reserve announces new measures to support the economy
On March 23, the Federal Reserve announced various new measures to support the economy during the Covid-19 crisis. The actions include:
- Purchasing Treasury securities and commercial and agency mortgage-backed securities to support smooth market functioning and effective transmission of monetary policy to broader financial conditions and the economy.
- Establishing a new program that will provide up to $300 billion in new financing to support the flow of credit to employers, consumers, and businesses. The Treasury Department will provide $30 billion in equity to these facilities by using the Exchange Stabilization Fund (ESF).
- Establishing two facilities to support credit to large employers: (i) the Primary Market Corporate Credit Facility (PMCCF) for new bond and loan issuance; and (ii) the Secondary Market Corporate Credit Facility (SMCCF) to provide liquidity for outstanding corporate bonds.
- Establishing a third facility, the Term Asset-Backed Securities Loan Facility (TALF), to support the flow of credit to consumers and businesses. The TALF will enable the issuance of asset-backed securities (ABS) backed by student loans, auto loans, credit card loans, loans guaranteed by the Small Business Administration (SBA), and certain other assets.
- Facilitating the flow of credit to municipalities by expanding the Money Market Mutual Fund Liquidity Facility (MMLF) to include a wider range of securities, including municipal variable rate demand notes (VRDNs) and bank certificates of deposit.
- Facilitating the flow of credit to municipalities by expanding the Commercial Paper Funding Facility (CPFF) to include high-quality, tax-exempt commercial paper as eligible securities. In addition, the pricing of the facility has been reduced.
Arkansas Securities Dept. issues Covid-19 corporate finance filings guidance
On March 20, the Arkansas Securities Department issued guidance for corporate finance filings in light of Covid-19. The guidance provides specific directions on making electronic filings. This interim guidance is in effect from March 23, 2020 through April 16, 2020 but is subject to change or withdrawal.